Retailers are facing unprecedented cost pressures with "no room to manoeuvre" as food inflation accelerated to 4.9 per cent in July, according to the British Retail Consortium's response to the latest inflation data.

The surge in food prices, which have climbed 1.9 percentage points in just four months, is forcing households to cut back on spending while retailers struggle to absorb mounting costs from government policies, poor harvests and global instability.

"Households are once again seeing the cost of their weekly shop climb," said Kris Hamer, director of insight at the British Retail Consortium. "This surge has been a key driver behind headline inflation, alongside a rise in transport costs, piling fresh pressure on families already being forced to cut back."

The warning comes as the Office for National Statistics reported overall inflation rising to 3.8 per cent in July, the highest level since January 2024. The Consumer Prices Index including owner occupiers' housing costs reached 4.2 per cent, up from 4.1 per cent in June.

Hamer said the Bank of England has been clear that government policies driving up employment costs are fuelling price rises at the till. The recent administration of Claire's Accessories was cited as further evidence of the pressure facing the retail industry.

Despite some limited relief from subdued clothing and footwear inflation and price falls in certain everyday items such as olive oil, butter and cheese, retailers are being squeezed by a "swathe of costs" that leave them unable to prevent price increases reaching consumers.

Consumer confidence remains firmly "in the doldrums" despite a marginal improvement, according to BRC chief executive officer Helen Dickinson. The BRC-Opinium Consumer Sentiment Monitor showed economic confidence at -32 in August, still 24 points lower than a year ago.

"While consumer confidence in the economy crept up this month, it remains 24 points lower than a year ago, with older generations seeing the biggest falls," Dickinson said. "With prices rising and food inflation predicted to hit 6 per cent by the end of the year, households are expected to spend more on retail goods in the coming months, particularly groceries."

The BRC is calling on the chancellor to avoid burdening the industry with additional taxes this autumn. Instead, Dickinson urged the government to encourage investment in high streets through significant business rates reductions for retail properties.

"Much rides on the Chancellor's plans for retail, hospitality and leisure, and only a significant reduction in the business rates burden can bring about the investment needed to reinvigorate Britain's high streets and town centres," she said.

The retail body warned that rising food prices will make it harder to lift consumer sentiment, with shoppers seeing "rising prices, gap-toothed high streets, and reports of large businesses falling into administration."

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